The lower a project's beta, the ____ is the project's ____ risk.
A) lower; systematic
B) lower; unsystematic
C) higher; systematic
D) higher; unsystematic

Question

Quizplus · Accepted Answer

Beta measures a project's systematic risk, which is a risk that arises due to market-wide factors that cannot be diversified away. A lower beta indicates that the project is less sensitive to market-wide factors and, thus, has lower systematic risk. Conversely, a higher beta indicates greater sensitivity to market-wide factors and, thus, higher systematic risk. Therefore, choice A is the best answer.

The Lower a Project's Beta, the ____ Is the Project's